Page 54
EXHIBIT 10(iii)A(8)
AMENDMENT OF
ASPIRATION ACHIEVEMENT INCENTIVE
AWARD AGREEMENT
AND
ELECTION FORM
WHEREAS, the undersigned Participant was granted an Aspiration Award under
the NSI Long-Term Achievement Incentive Plan (the "Plan") for the Performance
Cycle ending August 31, 1999; and
WHEREAS, under the Plan, the amount (if any) of the Aspiration Award the
Participant will receive for such Performance Cycle is currently uncertain; and
WHEREAS, the Plan has been amended to permit the Participant to receive all
or a portion of the Aspiration Award in a different form;
NOW, THEREFORE, the Participant hereby elects to receive any Aspiration
Award earned for the Performance Cycle ending August 31, 1999, in the manner
provided below and agrees to amend the Aspiration Achievement Incentive Award
Agreement in accordance with such election:
I. AMENDMENT TO SURRENDER / EXCHANGE AWARD (OR PORTION THEREOF) FOR STOCK
OPTIONS. By checking "YES" below, you are electing to amend your Aspiration
Achievement Incentive Award Agreement for the Performance Cycle ending August
31, 1999 to provide that your Award (or a portion thereof) will be exchanged as
indicated, to the fullest extent possible, for the grant of Options to acquire
NSI stock under the terms set forth below.
Page 55
EXHIBIT 10(iii)A(8)
Originally, one-half of the Aspiration Award, determined as of August 31,
1999, was to have been paid in cash and one-half in NSI stock. If you elect to
amend your Agreement, the value of the component of your Aspiration Award which
would have originally been paid in NSI stock will be adjusted to reflect any
change in NSI's stock price during the period August 31, 1999 to the
Determination Date (meaning that date in October, 1999 on which the Executive
Resource and Compensation Committee of the Board of Directors determines the
amount of the Award earned and payable). The total value of the Award at the
Determination Date will therefore be equal to the total of (a) the amount of the
Award as of August 31, 1999 and (b) the amount (either gain or loss) calculated
by multiplying (i) the number of shares you would have originally received by
(ii) the amount resulting from subtracting the Fair Market Value of NSI stock on
August 31 from the Fair Market Value at the Determination Date.
The amount of your Aspiration Award exchanged for Options will not be
currently taxable (i.e., it will be treated similarly to a bonus deferral). The
Options will be nonqualified options under the Plan. Please see the description
of the tax treatment for nonqualified options attached hereto as Exhibit "1". Of
course, you should consult your tax advisor.
_____ YES, I elect to amend my Agreement to provide for the exchange of all of
my Award (or a portion thereof), to the fullest extent possible, for the grant
of Options to acquire NSI stock under the terms set forth below, in the
following manner:
[ ] In exchange for $__________ of my Award (minimum $1,000).
[ ] In exchange for _________% of my Award (minimum $1,000).
[ ] In exchange for the grant of _________ Options (minimum 100 options).
Page 56
EXHIBIT 10(iii)A(8)
The portion of the Award elected above (whether measured in dollars, percentage,
or Options) will be surrendered from the total value of the Award at the
Determination Date. The calculation of Options granted in the exchange will be
rounded down to the next whole amount. Any unexchanged portion of your Award
will be payable half in NSI stock and half in cash.
_____ NO, I elect to continue to receive the entire Award payment half in NSI
stock and half in cash.
Terms of Stock Options:
(a) Each Option will be valued for purposes of the surrender and
exchange at a percentage, as provided below, of the Fair Market Value of
NSI stock (closing price on NYSE) on the Determination Date:
(1) At 24.35%, if the Fair Market Value of NSI stock is below
$40.00 on the Determination Date;
(2) At 20.00%, if the Fair Market Value of NSI stock is $40.00 or
greater on the Determination Date.
This value is less than the Black-Scholes formula to be used for
determining an annual option grant award.
(b) The exchange will be limited by the size of your Award payment and
may be further reduced, on a pro rata basis, for Options elected in excess
of the number of Options granted to you in September 1998 (or a fraction
thereof determined by the Committee on the Determination Date), if the
total number of Options elected by all participants exceeds the pool of
Options available for exchange. It is the intention of the Committee that
300,000 Options will be available for exchange. The final number of Options
available will be established by the Committee at the Determination Date,
and your election will be adjusted in accordance with the final number of
Options available.
Page 57
EXHIBIT 10(iii)A(8)
(c) The Options will be nonqualified stock options, will be fully
vested at the time of receipt, and will have a ten-year term except as
follows:
(1) in the case of termination due to death, Disability,
retirement at or after age 65, or involuntary termination by the
Company (other than for cause), the Options will remain exercisable
until seven years after the date of grant, or one year after the date
of termination, whichever is later;
(2) in the case of voluntary termination, the Options will remain
exercisable until 90 days after the date of termination; and
(3) in the case of involuntary termination for "cause", the
Options will expire on the date of termination.
The Options will generally have such other terms and conditions as the
nonqualified Options granted by the Company in September 1998.
Page 58
EXHIBIT 10(iii)A(8)
II. SIGNATURE. Sign and date this form below and return it to
Helen Haines.
The undersigned hereby agrees to amend the Aspiration Achievement
Incentive Award Agreement in accordance with the election in I. above.
---------------------------------------------
(Grantee)
---------------------------------------------
Date
Received and Award Agreement
Amendment approved
on behalf of
National Service Industries, Inc.:
By:____________________________________
Helen D. Haines
- ---------------------------------------
Date
Page 59
EXHIBIT 10(iii)A(8)
EXHIBIT 1
TAX TREATMENT
Nonqualified Stock Options ("NSOs"). On exercise of an NSO, the amount
by which the market price of the Shares on the date of exercise of the Stock
Option exceeds the purchase price for the Shares will generally be taxable to
the Participant as ordinary income and will generally be deductible for tax
purposes by NSI. Selling or transferring the Shares acquired upon exercise of an
NSO will generally result in a capital gain or loss for the Participant, but
will have no tax consequences for NSI. The gain or loss will be measured by the
difference between the amount realized on disposition of the Shares and the tax
basis of the Shares. The tax basis for the Shares will generally be equal to the
amount taken into ordinary income upon exercise of the Stock Option, plus the
amount of cash paid by the Participant upon exercise of the Stock Option (which
will in the aggregate generally be equal to the market price of the Shares at
the time the Stock Option was exercised).
Aspiration Awards. The grant of an Aspiration Award pursuant to the
Plan will not result in income for the Participant or in a tax deduction for
NSI. Upon the settlement of such an Award, the Participant will recognize
ordinary income equal to the fair market value of any Shares and/or any cash
received and NSI will be entitled to a tax deduction in the same amount.